The elephant in the room

When an individual loses their life, apparently for honestly-held political views, it seems unedifying in the extreme to discuss the market impact of such an event.  However, when those views touch upon an issue that has dominated the market narrative, and when the issues are so emotional, and the apparent market reaction so pronounced, it's hard to ignore the elephant in the room.

The entire Brexit debate has been a particularly tawdry one, with many arguments tugging at the emotional heartstrings rather than the little grey cells in the head.  From David Cameron's ludicrous warnings of warfare to Nigel Farage's repellant imagery, neither side has covered themselves in glory, apparently victims of the same virus that infected American politics some time ago.

With the most recent polls making the vote approaching too close to call, markets have understandably been on edge, particularly insofar as a Brexit would represent a voyage into the unknown where hope rather than expectation is the primary beacon.  With some press reports suggesting that Jo Cox's murderer shouted a nationalist slogan as he was committing the crime, it seems natural to project that neutrals and fence-sitters, abhorred by an act of pure evil, would swing away from the views expressed by the murderer....thus boosting the Remain camp.

The result is what you saw yesterday afternoon: a rip in equities and sterling (which had been on the ground earlier thanks to another pro-Leave poll result), a little weakness in fixed income, and a big decline in gold, reversing prior gains and putting in a massive reversal pattern.


Based purely on the charts, you'd say that yesterday afternoon's reversals should follow through.  Of course, there's factors other than chart patterns (or even the psychology behind them) that will drive price action.  Today sees triple witching option expiration, which is usually good for a few yuks during the day.

More prosaically, the next UK polls to include any potential swing after yesterday's abomination are, if Macro Man's calculations are correct, not due until Monday.  How those turn out will play a big part in driving market direction at the beginning of next week.

In the meantime, it's probably too much to expect that a shocking event such as yesterday's will mark the beginning of the end of the vile breed of politics that has infected so many countries recently.  However, we can still hope; while that might be a lousy investment strategy, it's a prerequisite for a less appalling tomorrow.



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Anonymous
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June 17, 2016 at 7:31 AM ×

Of course, there's nothing to say there won't be another shocking event before the vote flipping sentiment/markets again.

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checkmate
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June 17, 2016 at 8:31 AM ×

With expiry and the recent volatility I'd say yesterday was nothing more than positioning issues and news colliding. Whilst the murder was tragic on a micro level to her family and friends I'd have to say at a macro level it's not going to have any effect whatsoever at the ballot box. Let's not confuse the actions of over exposed market players with those of Joe Public.

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Anonymous
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June 17, 2016 at 8:34 AM ×

Interesting how the powers that be switched on the algos yesterday to reverse this entire market fall. Dow rallied 300 points yesterday with SPX seeing huge buy orders flooding the orderbook, and EuroSTOXX and Dax are smashing higher today. Folks, wake up and smell the coffee. SPX is going to smash through 2100 to a massive new all time high, and all the other equity indexes will follow. Central Banks will intervene in FX and FI to support this move, and all those short will be decimated. Every dip is to be bought.

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Anonymous
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June 17, 2016 at 8:37 AM ×

SPX? boring.... it lagged European equities on the way up.

Lags things on the way up,lags things onthe way down...

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Anonymous
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June 17, 2016 at 8:38 AM ×

A dreadful act carried out by a crazy man who had apparently recently had psychological treatment and a chart reversal pattern. it's hardly a Macro point of view is it?

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henner
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June 17, 2016 at 8:48 AM ×

being German this sadly reminds me of the case of Henriette Reker who got stabbed just a day before the mayoral elections by a right-wing attacker about a year ago because she stood up for immigrants. the result was that she was elected just the day after with her being in hospital which was against the polls... this is different and it's still a week to go but in general I can see it influencing the vote. I'm in the "Bremain" camp with risk on, dollar weakening, commodities up but I have to confess that my last ten days where quite miserable PnL wise

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Thud and Blunder
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June 17, 2016 at 9:47 AM ×

People arguing that this tragedy will have no impact either think we're all bloodless savants (savants tend to extrapolate their own experience, but good luck with that), or are revealing their biases (do you think the counterfactual case of a Syrian migrant killing a pro-Brexit MP would have had no effect?).

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JB
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June 17, 2016 at 9:57 AM ×

Checkmate...... I very much agree. Think the markets started to get a little ahead of themselves and were pricing in a little too much fear. The reversals seen in everything from FI to European banks is nothing more than and over bought/over sold pullback/bounce. I really don't see how this will change the opinion of the wider public. I can see Henner how this would impact a local election but not something national on a national level.

Anon 8.34...... The BTFD mantra is getting a tad boring. We have just seen a 8-9% sell off in European bourses in a little over a week..... That's a very expensive draw down if your trading/investing strategy is that basic.

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JB
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June 17, 2016 at 10:00 AM ×

T and B...... I have no Bias and am still on the fence as to my vote. 1 mentally Ill lunatic though isn't the same as a far right extremist.

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Anonymous
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June 17, 2016 at 11:03 AM ×

move yesterday today also exaggerated by expiry today- and jun open is usually big OI-on the whole think FI might have sen a local top for a while

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Anonymous
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June 17, 2016 at 11:06 AM ×

It's probably too much to expect that a shocking event such as yesterday's will mark the beginning of the end of the vile breed of Economic policy that has infected so many countries recently.
The financial repression and 'austerity' visited on the populace of Europe for the good of asset prices and the wealthy is the real culprit here. Very few would be exercised by immigration if they were secure in their incomes and homes. But they are not; they are begin disenfranchised socially and financially as a deliberate act of policy.
This bovine middle class consensus that 'no change' is good (as long as my assets are inflated!) is taking a huge social, financial and personal toll across the continent.
Ignoring these facts and continuing unabated - as the EU/ECB/BoE/UK Gov leadership has shown is their intent - will surely rend Europe and/or individual nations asunder. Or, Mark 3:25 .

I suspect this dreadful act - committed by an unstable individual - was likely prompted by the extreme actions and utterances of various actors during this referendum. Although I couldnt honestly lay the blame at any one door.

And with all that, I cannot but reflect not just on the act but on the loss Jo Cox' family and children have suffered. The loss of a mother is a grevious thing and will stay with them long after this referendum.

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Bigtail
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June 17, 2016 at 11:17 AM ×

Of course yesterdays event affects the voters. Especially the undecided (11%-15%) and the ones who just took the step one the fence but feel queasy about some of the arguments for Brexit. They are allergic to the feeling of being bunched together with a far right category (true or not).
As the Brexit/Bremain vote has been so closely correlated with immigration issues, this is certainly a very sensitive area where events like yesterdays has an impact.
Nothing strange with that.

If nothing else, Mondays Brexit/Bremain survey will provide some clues and the market will then react accordingly.

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JB
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June 17, 2016 at 12:28 PM ×

In Reality the undecided will remain so. A large percentage wont vote on the day. Just because of the very tragic death of Jo Cox, it wont make people feel more European.

Without drawing attention away from MMs blog. Ive just read Polemics comments from yes eve. Very well put.

http://polemics-pains.blogspot.co.uk/2016/06/i-think-what-you-think-is.html

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Anonymous
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June 17, 2016 at 12:29 PM ×

Agree it will have an impact on those on the edge. Even though its illogical as the event, however terrible, doesn't fix or change persisting EU anti-democracy problems and its continuous instigation of uncontrolled mass migration, which the whole vote has so far boiled down to.

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washedup
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June 17, 2016 at 12:47 PM ×

While I have no reason to disagree with the consensus that Bremain will win, I do think squeaking ahead by a razor thin 1-2% margin won't cut it, since the global trend in collecting ones toys would still be unmistakably clear.
Your move, Mr Bullard - oh wait, what? No Hikes, ever? Really, what changed? Ah, the pretty TV interviewer seemed a little worried about growth - well, all good then.

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checkmate
admin
June 17, 2016 at 3:18 PM ×

"will have no impact either think we're all bloodless savants "
Assume given the placement that was aimed at me. Let me say that maintaining a dispassionate view able to distinguish the relevant from the irrelevant has not led me down too many erroneous paths. If you believe that the killing of one individual by another who was mentally unstable will create significant ripples at the ballot box then you have a vastly different view than I of how people pursue their self interest. Tragic though this was it is mimicked the world over and on a much larger scale at typically a couple of times a year. Tragic ,but not not very unusual.

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Macro Man
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June 17, 2016 at 3:35 PM ×

@ checkmate

Cox was the first sitting UK MP to be murdered/assassinated in 26 years, and the first to be killed by someone other than Irish republicans since 1812. I think most reasonable people would call that "unusual". While it's all well and good to hand-wave away the murderer as "mentally unstable", it seems as if he did indeed have far right sympathies. Coming on the same day that Farage launched a campaign poster that looks like it was lifted straight from Goebbels, I find it difficult to credit that fence sitters would not alter their opinion in the least.

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Thud and Blunder
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June 17, 2016 at 4:00 PM ×

Checkmate, if you haven't been down too many erroneous paths, you should probably get out more. Might find that flesh and blood humans don't follow your Benthamite calculus. Life is not chess.

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Anonymous
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June 17, 2016 at 4:56 PM ×

This blog is sounding very left-wing and narrow-minded lately. Associating Brexit with a mentally unstable person shows the idiocy of several posting here. The killing yesterday was just another abominable act, it demeans us all to ascribe political intent to it.

Brexit is about people wanting Parliamentary Sovereignty, and not wanting to be ruled by fascist un-elected european elites. The EU represents a global elite of politicians and big business (the 1%) who have caused the GFC and are intent in repeating the mistakes that led up to it. They have caused humanitarian atrocities in Southern Europe (Greece etc) and it is only logical to vote against them.

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Anonymous
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June 17, 2016 at 5:00 PM ×

Everyone here should go read Polemic's post:

Jo Cox's murder should be completely dissociated from Brexit. From both sides. It's in the worst possible taste to raise it. But people just can’t help associating and blaming awful events on things they don’t approve of.

http://polemics-pains.blogspot.co.uk/2016/06/i-think-what-you-think-is.html

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checkmate
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June 17, 2016 at 5:07 PM ×

T & B
The personal is invariably the sign that there is no objective argument to be made. Well done in proving the concept.

MM.,
I don't typically find myself in disagreement with you ,but in this case we are there. The latest polls don't show the fence sitters to be that large a group when measured against prior 'ballot box' events. Hence, my comment that I do not think the ripples at the ballot box will be significant. That is the same has me saying that it won't change the decisions of the 97% who were estimated to have already made up their mind on the issue.
A for being usual or unusual simply because the target is an MP ? I meant it within the context of how usual or unusual is it for say a soldier to be decapitated in the street by a machete waving individual ranting about religion, or how unusual is it for a group of gay people to be slaughtered by a deranged idiot who can't get his sexuality and religion straight in his head? In other words person(s) killed by people with history of being mentally unstable is not 'unusual' . If you think it is then please go talk to the relatives of the German flight that was flown into a mountain by one of the same. Appears to me we see this kind of event with some regularity and the only 'unusual' thing about this one is that someone decided they key motivation was political hate has opposed to the many other forms of hate we are used to seeing in the headlines. Personally, I question the logic of that. I'd be of the view the common denominator is mental illness and you can take your pick or throw darts at a board to select a trigger that transforms that to action.
Now that's all I have to say on this issue ,because lost amongst this has I said earlier is that for the person an family and friends involved the world hurts and will do for along time.

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johno
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June 17, 2016 at 6:34 PM ×

Took a cautious punt after yesterday's post on gold. The reversal pattern MM points out does give pause and argues for a tight stop, but ... I feel like I've been here before, with some binary event keeping me from taking a position and I miss the move I expected because it happens in the run up to the event. Could happen here again. Fast-money on Brexit via gold perhaps washed out of their positions yesterday. My reasoning for being long has nothing to do with Brexit and much to do with the Fed's more visible uncertainty/renewed bias to do nothing. A Remain vote should be dollar negative, so after the convulsions immediately following the vote, I'm not sure it would be that bad for gold anyway. That said, I'd probably be out of the position shortly before the vote, assuming I'm not stopped first.

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Anonymous
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June 17, 2016 at 6:47 PM ×

One witness quoted by MSM denies hearing "Britain first" and another witness claiming to have heard it belongs to an organization which is having feuds with the anti-EU Britain First. In 2003 the pro-EU Swedish foreign minister was also murdered days before the Swedish euro referendum, yet they still managed to say no. Sometimes these events are just quite conveniently placed.

http://www.breitbart.com/london/2016/06/17/britain-first-eyewitness-bnp-member-list/

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Leftback
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June 17, 2016 at 8:00 PM ×

I hate to take a position on this as I am in total sympathy with MM's views. However, the powerful forces of options expiration were also at work yesterday to amplify any possible effect of the tragic event.

Oil up 4% today, although US rig count was up for the third straight week. We will call that an indication of blatant pre-OpEx manipulation of a smaller market by persons unknown (leveraged longs and vol sellers) and we will fade that move.

Adding to USO short and UUP long here, but playing smaller than last week after booking some decent profits. We are keeping an eye on EURUSD, AUDUSD, USDJPY and CADUSD with intent to short all of these pairs again some time next week. For now we are going to hold off and wait for this little "risk on" bounce in USDJPY to be completed.

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Roger
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June 17, 2016 at 9:46 PM ×

"...Brexit would represent a voyage into the unknown..."

It seems to me that Britain's long history apart from the European mainland and its satellites is largely a known quantity.

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Macro Man
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June 17, 2016 at 11:18 PM ×

Oh really? Perhaps you'd care to elucidate us on how leaving the EU would impact, say, the City, in terms of profitability, ongoing access to EU markets, potential relocations/job losses and any concomitant knock-on effects to the broader economy. The world when the UK joined the EU looks nothing like the world today.

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washedup
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June 18, 2016 at 12:04 AM ×

http://finance.yahoo.com/news/it-s-time-for-the-federal-reserve-to-fire-james-bullard-171554375.html

I am rooting for this to become a popular movement.

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Fcp
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June 18, 2016 at 12:51 AM ×

That oil complex call a week or so ago was spot on.. So thanks whoever it was! This is why I read this blog

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Anonymous
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June 18, 2016 at 10:45 AM ×

MM - Do you mean those banks that failed and had to be bailed out by the taxpayer at HUGE public expense? Also the fact that most of the City focuses on international capital markets not just access to the EU. And finally the fact that the UK economy is too City focused, and needs to re-balance - so some short term pain to the UK, would in fact end up being long term gain. Anyway what are those banks going to do, relocate to France, Germany etc with the FTT destroying most of their profits? I don't think so...

Do remember that the UK is one of the biggest financial contributors to the EU, if we leave, the EU suffers way more than us. Personally I think Brexit will force an implosion of the EU which can only be a good thing. No one wants a statist, undemocratic, incompetent ruling elite. I would have though Americans would understand that, clearly not...

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Bruce in Tennessee
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June 18, 2016 at 12:53 PM ×

http://www.bloomberg.com/news/articles/2016-06-15/china-dumping-more-than-treasuries-as-u-s-stocks-join-fire-sale

Equity holdings fall $126 billion from July, U.S. data show
Drop of 38% compares with 9% reduction for all foreigners



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washedup
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June 18, 2016 at 1:43 PM ×

BinT - thats the gargantuan flow that dwarfs all others in the last few months no doubt - SWF's selling global equities while buying US treasuries - you would think this would increase treasury prices (check) and lower equities (yes, except US equities) - overall I think the backdrop of dollar shortage is very much intact but has been masked by an even greater demand for JPY.

I am expecting dollar to weaken next few weeks post brexit relief, which should be a back up the truck moment - at some point the market will be fully tapped out on the 'sell the dollar because the fed won't raise' meme and realize the asymmetry from there works just one way.

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Anonymous
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June 18, 2016 at 3:25 PM ×

Anyone heard of credit lines freezing up ahead of referendum? Was talking to the Finance Director of a large Multi-national in UK & Ire who intimated there was nothing out there ahead of the vote. Didn't know him well enough to dig deeper.

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jual kondom
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June 18, 2016 at 11:49 PM ×

nice post, thanks for sharing...

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Anonymous
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June 19, 2016 at 9:35 AM ×

The UK referendum is being vastly over-hyped by financial markets. Looking back, it's going to be a non-event. Remember all the Greek crisis crap over the last few summers... we were all going to die in a financial mega-apocalypse... what happened? Nothing. Exactly. Don;t get me wrong I'd love to see the EU implode, we're just not going to be that lucky. Expect the same old central bank bs, with broken markets, for the next 30 years.

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Anonymous
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June 19, 2016 at 10:45 AM ×

http://www.bloomberg.com/view/articles/2016-06-17/britain-s-elites-ignore-the-masses-at-their-peril

Elites need to voted out asap.

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Anonymous
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June 19, 2016 at 11:09 AM ×

The truth behind the EU:

http://www.dailymail.co.uk/news/article-3647600/We-told-EU-makes-stronger-haunting-dispatch-despairing-destitute-Greece-make-change-mind.html

VOTE BREXIT !!!!!!!!!!!!!!!!!!!!!!!!!!!

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rp
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June 19, 2016 at 6:53 PM ×

Enough of the nonsense from anons, let's talk planned event risk. The financial media is hyping this up to be bigger than Black Wednesday with gap-like CHF talk added to the mix ...which i don't think can be the case given the trickle of info and order flow over the night:

No exit polls, just turnout. First few results should be out at midnight with a trickle in the first few hours, but nothing significant expected til 4am(ish) London time, listed markets aren't putting on any extraordinary hours so nothing there til 0700, so gaps on the open likely (price limits?-i think for equities only).

What do we think this says about the character of any move?

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Anonymous
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June 19, 2016 at 8:31 PM ×

Closest reference is the Greek deal last year where markets had almost accepted there would be no deal into weekend. Deal, according to Peter Spiegel from FT was only struck at 6:30am the next Monday. Belgian PM leaked deal at about 7:20 on twitter causing a 100tick snap reversal in. EuroStoxx 50.

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Anonymous
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June 19, 2016 at 8:33 PM ×

Your other points of reference are the two preludes into Grexit finale where market got ahead of itself on a deal only for something to happen over weekend, Tsipras calling snap elections at 12pm central European time on Friday night. Fairly shook the markets the following Monday.

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Anonymous
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June 19, 2016 at 8:36 PM ×

If you think about, Greece leaving EU and euro was seen as a big deal even though they were the weakest link. What message does it send if one of the stronger partners leave or have a strong Remain?

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Anonymous
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June 19, 2016 at 8:43 PM ×

In terms of the 4-7am event risk RP, liquidity will be likely be lighter than 10seconds before FOMC or NFP. No market maker will want much risk. Usually, there's the impression of liquidity in ZN or Emini during this period. Not this night. The fear of what happened to some, and what could have happened to others after SNB is too great.

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Anonymous
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June 19, 2016 at 8:49 PM ×

Finally, to add, Leave is still a real risk until the votes are cast. A terrorist event between now and then would swing things back. Appears to be the way the swing/polls/media are playing. Only 7 days ago we had Orlando. Jo Cox dominates media now. Unfortunately, this is what dominates discussion of EU membership.

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Corey
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June 20, 2016 at 5:18 AM ×

Anon 6/17 11:35. Yes yes and yup.

6/19 9:35. Agree. Who cares. Seriously. Only the Britons and I'm confident that they are sensible enough to make the right choice.

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